I'm not too pleased about this, but I'll give it a chance. One particularly noticeable implication is that The Hobbit is, for the most part, going to be a sequel to The Lord of the Rings. Frodo is reading the Red Book after his return from Mordor, and the entire story of Bilbo is told as a very long flashback. I guess that's the filmmakers' way of tailoring The Hobbit for an audience which has already experienced The Lord of the Rings.

I wonder: will the White Council/Necromancer/Dol Guldur scenes be included in Bilbo's tale in the Red Book of Westmarch? Any other way would necessitate the interruption of the storytelling, so that Gandalf can contribute the parts of the story for which Bilbo wasn't present (or something along those lines).

I think it would have been better to make Sam the narrator, and have him read Bilbo's part of the Red Book aloud to his children. That way flows better with The Lord of the Rings, as we saw Frodo hand Sam the book towards the end of the third film, and we also saw Sam's children. Establishing a connection between the Red Book and Sam's progeny would also flow better with Tolkien's writings, as they inherited it. Since Sean Astin is older now, it would make sense for him to play the older Sam – much more sense than it makes for the older Elijah Wood to be playing the younger Frodo. Maybe the second film could have ended with Sam saying goodbye to Elanor at the Grey Havens, and giving the Red Book into her keeping... but making Frodo the narrator means that these films, as a whole, will have to slot in somewhere in between the multiple endings of Return of the King – talk about awkward storytelling chronology!